Introduction to Cryptocurrencies

10 08 2018

The introduction of the first e-payment and e-money systems was a breakthrough but people soon became irritated with transaction fees and started searching for the ways to reduce or eliminate them. There were a plenty of ideas in the air but in 2008 a guy who called himself Satoshi Nakamoto has published an article in which he described cryptocurrency – free from centralized control e-money system.

Cryptocurrency is a digital monetary unit, an alternative to fiat money and currencies. Each unit is created in digital space through the specific technology. Though cryptocurrency has its own nomination and attached to a certain exchange rate, it doesn’t have any security marks, numeration or serial number, and other features of “real” money.

Currently, there are approximately 1000 cryptocurrencies mined with different technologies and judging by the tendency and trends, there will be more of them. When new cryptocurrency appears more of its units are mined with specific computing devices, mostly function processors and GPUs. There are also special devices designed for mining purposes, called ASICs.

Cryptocurrencies’ Main Features

Its issuing and circulation are not controlled by any financial institutions. There are no dedicated or priority units. Each section or network member have the same rights. The owners of Bitcoin or other cryptocurrency wallets are anonymous.

Cryptocurrency is not issued by an emission centre, it is produced or mined within the network with special devices designed to execute certain computing tasks.

The emission is limited. Experts assume that cryptocurrency is not subject to inflation.

Cryptocurrency can not be forged.

The funds held at cryptocurrency wallets cannot be confiscated, frozen or arrested.

The transactions are irreversible – they cannot be changed or cancelled.

The cryptocurrency account or wallet and cryptocurrency transactions are 24/7 available and can be executed online at any time.

Historical Background

Why would someone create cryptocurrency? It can be partially explained by its features. Before cryptocurrency was introduced there was no way to make anonymous and secure money transfers in a quick and accessible way. With Bitcoin and other cryptocurrencies, this has become real.

The official birth year of bitcoin is 2009 when the Bitcoin network has begun functioning. Satoshi Nakamoto is considered to be the father of Bitcoin and other cryptocurrencies. Nobody knows exactly who is he – it may be a pseudonym belonging to a person or even to a group of people who have published the Bitcoin protocol.

Obviously, Satoshi Nakamoto put together and realized the years-long groundwork of the IT and cryptography specialists.

For the first time, the term “cryptocurrency” was used in 2011, in Forbes article about Bitcoin. The readers and the fans of virtual currency liked it and soon the word was used as a general term for the whole niche.

Why do we need it?

The cryptocurrency may be useful for a number of purposes: from shopping to money saving.

Payments. It is not just about transactions, it is a way to do them anonymously, directly, and rapidly. The money can be transferred between individuals and as a payment for goods and services on the Internet.

Money saving. It is almost impossible to steal money from a crypto-wallet. All the operations are irreversible and are executed with private keys which makes them invulnerable to interception or hacking. As long as you keep your private key secret, your coins are safe.

Investment. Bitcoin and other cryptocurrencies are considered to be a good investment asset due to the fluctuations in the exchange rates and overall popularity growth. What’s important, the cryptocurrency is suitable for both short-term investment as a tool for trading at an exchange and for long-term investment because the exchange rates are obviously growing.

Business. More and more companies and services accept crypto-payments. Cryptocurrency startups raising funds through ICO crowdfunding have become a common thing.

How to earn your cryptocurrency?

One of the most popular ways to earn your cryptocurrency is mining. Mining is the process of solving certain cryptographic problems and equations with different difficulty. They are solved by special devices designed for this purpose.

The aim of the mining is to pick a digital signature closing the block. When the block is closed the miner is rewarded and the new block starts to form. For cryptocurrency mining, people use processors, GPUs, or special equipment (ASICs, FPGAs).

But without mining there are some easier ways of earning cryptocurrency:

Cranes – services where people are rewarded with Bitcoins for doing small tasks like solving captchas, web-surfing, and etc.

Bounty – advertising new ICOs through posting, reposting, translations. In the beginning, you get free tokens which then become actual cryptocurrency.

Posting/copywriting – the members of Steemit and Golos get rewarded with utility tokens of those services. Then it can be converted at exchanges.

Bitcoin or other altcoins can be purchased. It can be done online at the exchanges, exchange offices, or you can even buy directly from individuals. You will need a VISA or Mastercard, or funds at any digital account.

The most popular cryptocurrencies

Bitcoin (BTC) – the first, the most popular, and the most expensive cryptocurrency. For the first several years the majority of the cryptocurrencies was based upon the Bitcoin blockchain. They were forks of the original currency. All the other currencies are also called altcoins.

In 2011 Ripple emerged and put the theory of Six degrees of separation to the practice. Ripple coin is non-minable. It became the first ever cryptocurrency that was not a Bitcoin fork. In 2015 the Ethereum platform was launched. It is an ecosystem for creating the blockchain-based projects with the use of smart-contracts. Later Ethereum became the second largest cryptocurrency after Bitcoin.

Our future will definitely be connected with cryptocurrencies. Since they have appeared in 2009 the opportunities they give and their popularity are growing. That’s why in the first quarter of century XXI we will witness the overall cryptorevolution.